Rights and obligations relating to an occupational pension scheme do not automatically transfer under TUPE. However, this exclusion only applies to pension benefits which are ‘old age, invalidity or survivors’ benefits’ (Regulation 10).

In Beckmann v Dynamco Whicheloe Macfarlane Ltd (2002) and Martin v South Bank University (2002), the ECJ held that enhanced benefits payable on early retirement and redundancy were not ‘old age’ benefits. Liability for these benefits (often referred to as ‘Beckmann and Martin’ rights) therefore transferred under TUPE to a purchaser. These cases left several areas of uncertainty which are usually dealt with by the inclusion of appropriate indemnities from the seller to the buyer in commercial deals.

The scope of ‘old age, invalidity and survivors’ benefits’ has now been further clarified by the High Court in The Proctor & Gamble Company v Svenska Cellulosa Aktiebolaget (SCA) and another.This case concerned the asset sale of Proctor & Gamble’s tissue towel business to SCA. Some of the transferring employees were members of Proctor & Gamble’s Pension Fund which provided various early retirement benefits. A dispute arose as to whether liability for these early retirement benefits transferred to SCA under TUPE.

The High Court ruled on three main issues:

  • the right to be considered for a benefit transfers under TUPE. Therefore a right to be considered for an early retirement provision can transfer, and any subsequent application for early retirement must be considered fairly and in good faith;
  • the buyer only takes on liability for an enhanced early retirement pension that is no longer available to employees after the transfer, not for the full retirement pension. These employees cannot make a double recovery by also claiming a full early retirement pension from the buyer;
  • only liability for benefits payable from actual retirement to the normal retirement date can transfer. Liability for instalments of an early retirement pension payable past normal retirement date relates to ‘old age benefits’ within the scope of the TUPE exception and does not transfer.

This case is likely to be appealed, which should provide further guidance on these areas, as well as on the practical difficulties involved in implementing them.